PRINCIPLES OF
MANAGEMENT
INTRODUCTION TO PRINCIPLES OF
MANAGEMENT
• The principles of management, then, are the means by which you actually manage, that is,
get things done through others—individually, in groups, or in organizations. Formally
defined, the principles of management are the activities that “plan, organize, and control
the operations of the basic elements of people, materials, machines, methods, money and
markets, providing direction and coordination, and giving leadership to human efforts, so
as to achieve the sought objectives of the enterprise.”
QUALITY MANAGEMENT PRINCIPLES
Customer Focus
• Organizations depend on their customers and therefore should understand
current and future customer needs, should meet customer requirements and
strive to exceed customer expectations.
Engagement of People
• People at all levels are the essence of an organization and their full involvement
enables their abilities to be used for the organization’s benefit and allow the
organization to achieve common goals including quality objectives.
QUALITY MANAGEMENT PRINCIPLES
Improvement
• Continual improvement of the organization’s overall performance should be a permanent
objective of the organization. Undertaking internal audits at regular intervals can assist
with identifying opportunities for improvement
Relationship Management
• An organization and its interested parties (including suppliers) are interdependent and a
mutually beneficial relationship enhances the ability of both to create value.
Communication is key to maintaining and improving the quality management system
(QMS).
QUALITY MANAGEMENT PRINCIPLES
Leadership
• Leaders (top management) establish unity of purpose and direction of the
organization. They should create and maintain the internal environment in which
people can become fully involved in achieving the organization’s objectives.
Process approach
• A desired result is achieved more efficiently when activities and related resources
are managed as a process. The process approach incorporates the Plan-Do-
Check-Act (PDCA) cycle and risk-based thinking.
QUALITY MANAGEMENT PRINCIPLES
Evidence-based Decision Making
• Effective decisions are based on the analysis of data and information. It is
important to make decisions based on the facts, plan changes and verify the
effectiveness of change.
The fundamental notion of principles of management was developed by French management theorist
Henri Fayol (1841–1925). He is credited with the original planning-organizing-leading-controlling
framework (P-O-L-C), which, while undergoing very important changes in content, remains the
dominant management framework in the world. For this reason, principles of management are often
discussed or learned using a framework called P-O-L-C, which stands for planning, organizing,
leading, and controlling.
FAYOL'S 14 PRINCIPLES OF MANAGEMENT
1. Division of Work – When employees are specialized, output can increase because they become increasingly skilled and efficient.
2. Authority – Managers must have the authority to give orders, but they must also keep in mind that with authority comes
responsibility.
3. Discipline – Discipline must be upheld in organizations, but methods for doing so can vary.
4. Unity of Command – Employees should have only one direct supervisor.
5. Unity of Direction – Teams with the same objective should be working under the direction of one manager, using one plan. This
will ensure that action is properly coordinated.
6. Subordination of Individual Interests to the General Interest – The interests of one employee should not be allowed to become
more important than those of the group. This includes managers.
7. Remuneration – Employee satisfaction depends on fair remuneration for everyone. This includes financial and non-financial
compensation.
FAYOL'S 14 PRINCIPLES OF MANAGEMENT
1. Centralization – This principle refers to how close employees are to the decision-making process. It is important to aim
for an appropriate balance.
2. Scalar Chain – Employees should be aware of where they stand in the organization's hierarchy, or chain of command.
3. Order – The workplace facilities must be clean, tidy and safe for employees. Everything should have its place.
4. Equity – Managers should be fair to staff at all times, both maintaining discipline as necessary and acting with kindness
where appropriate.
5. Stability of Tenure of Personnel – Managers should strive to minimize employee turnover. Personnel planning should be
a priority.
6. Initiative – Employees should be given the necessary level of freedom to create and carry out plans.
7. Esprit de Corps – Organizations should strive to promote team spirit and unity.
THE MANAGER
Managers are required in all the activities of organizations: budgeting, designing, selling,
creating, financing, accounting, and artistic presentation; the larger the organization, the
more managers are needed. Everyone employed in an organization is affected by
management principles, processes, policies, and practices as they are either a manager or a
subordinate to a manager, and usually they are both.
We tend to think about managers based on their position in an organization. This tells us a bit about their role and the nature of their
responsibilities.
• In both the traditional and contemporary views of management, however, there remains the need for different types of managers.
• Top managers are responsible for developing the organization’s strategy and being a steward for its vision and mission.
• Functional managers are responsible for the efficiency and effectiveness of an area, such as accounting or marketing.
• Supervisory or team managers are responsible for coordinating a subgroup of a particular function or a team composed of
members from different parts of the organization.
• Line manager leads a function that contributes directly to the products or services the organization creates. For example, a line
manager (often called a product, or service manager) at Procter & Gamble (P&G) is responsible for the production, marketing,
and profitability of the Tide detergent product line.
• A staff manager, in contrast, leads a function that creates indirect inputs. For example, finance and accounting are critical
organizational functions but do not typically provide an input into the final product or service a customer buys, such as a box of
Tide detergent. Instead, they serve a supporting role.
• A project manager has the responsibility for the planning, execution, and closing of any project. Project managers are often
found in construction, architecture, consulting, computer networking, telecommunications, or software development.
• General manager is someone who is responsible for managing a clearly identifiable revenue-producing unit, such as a store,
business unit, or product line.
THE CHANGING ROLES OF MANAGEMENT
AND MANAGERS
THE NATURE OF MANAGERIAL WORK
• Managers are responsible for the processes of getting activities completed efficiently with and
through other people and setting and achieving the firm’s goals through the execution of four basic
management functions: planning, organizing, leading, and controlling. Both sets of processes
utilize human, financial, and material resources.
• There have been a number of studies on what managers actually do, the most famous of those
conducted by Professor Henry Mintzberg in the early 1970s. One explanation for Mintzberg’s
enduring influence is perhaps that the nature of managerial work has changed very little since that
time, aside from the shift to an empowered relationship between top managers and other
managers and employees, and obvious changes in technology, and the exponential increase in
information overload.
The three interpersonal roles are primarily concerned with interpersonal relationships. In the
figurehead role, the manager represents the organization in all matters of formality. The top-level
manager represents the company legally and socially to those outside of the organization. The
supervisor represents the work group to higher management and higher management to the work
group. In the liaison role, the manager interacts with peers and people outside the organization. The
top-level manager uses the liaison role to gain favors and information, while the supervisor uses it to
maintain the routine flow of work. The leader role defines the relationships between the manager and
employees.
• The direct relationships with people in the interpersonal roles place the manager in a unique
position to get information. Thus, the three informational roles are primarily concerned with the
information aspects of managerial work. In the monitor role, the manager receives and collects
information. In the role of disseminator, the manager transmits special information into the
organization. The top-level manager receives and transmits more information from people outside
the organization than the supervisor. In the role of spokesperson, the manager disseminates the
organization’s information into its environment. Thus, the top-level manager is seen as an industry
expert, while the supervisor is seen as a unit or departmental expert.
ANCIENT HISTORY: MANAGEMENT THROUGH
THE 1990S
• Early Management Principles
• Early management principles were born of necessity. The most influential of these early
principles were set forth by Henri Fayol a French mining engineer. In 1888, Fayol
became director of a mining company. The company was in difficulty, but Fayol was able
to turn it around and make the company profitable again. When he retired, Fayol wrote
down what he’d done to save the company. He helped develop an “administrative
science” and developed principles that he thought all organizations should follow if they
were to run properly.
Management Ideas of the 1990s
• Peter Drucker was the first scholar to write about how to manage knowledge workers, with his
earliest work appearing in 1969. Drucker addressed topics like management of professionals, the
discipline of entrepreneurship and innovation, and how people make decisions. In 1982, Tom Peters
and Robert Waterman wrote In Search of Excellence, which became an international best seller and
ushered a business revolution by changing the way managers viewed their relationships with
employees and customers. On the basis of the authors’ research focusing on 43 of America’s most
successful companies in six major industries, the book introduced nine principles of management that
are embodied in excellent organizations:
TIME AND MOTION
•Frederick Winslow Taylor, a contemporary of Fayol’s, formalized the principles of scientific management in his 1911
book, The Principles of Scientific Management. Taylor described how productivity could be greatly improved by
applying the scientific method to management; for this reason, the scientific approach is sometimes referred to as
Taylorism.
•Taylor is most famous for his “time studies,” in which he used a stopwatch to time how long it took a worker to perform
a task, such as shoveling coal or moving heavy loads. Then he experimented with different ways to do the tasks to save
time. Sometimes the improvement came from better tools. For example, Taylor devised the “science of shoveling,” in
which he conducted time studies to determine how much weight a worker could lift with a shovel without tiring. He
determined that 21 pounds was the optimal weight. But since the employer expected each worker to bring his own
shovel, and there were different materials to be shoveled on the job, it was hard to ensure that 21-pound optimum. So,
Taylor provided workers with the optimal shovel for each density of materials, like coal, dirt, snow, and so on. With these
optimal shovels, workers became three or four times more productive, and they were rewarded with pay increases.
Themes for Excellent Organization
• Managing Ambiguity and Paradox – The ability of managers to hold two opposing ideas in mind at the same
time and still be able to function effectively.
• A Bias for Action – A culture of impatience with lethargy and inertia that otherwise leaves organizations
unresponsive.
• Close to the Customer – Staying close to the customer to understand and anticipate customer needs and wants.
• Autonomy and Entrepreneurship – Actions that foster innovation and nurture customer and product champions.
• Productivity through People – Treating rank-and-file employees as a source of quality.
• Hands-On, Value-Driven – A management philosophy that guides everyday practice and shows management’s
commitment.
• Stick to the Knitting – Stay with what you do well and the businesses you know best.
• Simple Form, Lean Staff – The best companies have very minimal, lean headquarters staff.
• Simultaneous Loose-Tight Properties – Autonomy in shop-floor activities plus centralized values.
LEADERSHP, ENTREPRENEURSHIP, STRATEGY
• The principles of management are drawn from a number of academic fields, principally,
the fields of leadership, entrepreneurship, and strategy.
Leadership
• If management is defined as getting things done through others, then leadership should be
defined as the social and informal sources of influence that you use to inspire action taken
by others. It means mobilizing others to want to struggle toward a common goal.
Great leaders help build an organization’s human capital, then motivate individuals to take
concerted action. Leadership also includes an understanding of when, where, and how to use more
formal sources of authority and power, such as position or ownership. Increasingly, we live in a world
where good management requires good leaders and leadership. While these views about the
importance of leadership are not new, competition among employers and countries for the best and
brightest, increased labor mobility (think “war for talent” here), and hyper competition puts pressure
on firms to invest in present and future leadership capabilities.
HOW TO BE A GREAT LEADER
1. Learn from other leader.
2. Work to build skills.
3. Believe you are a leader.
4. Take up more tasks.
5. Share your ideas.
6. Listens to others.
7. Learn how to delegate to get things done.
8. Treat other leaders with respect.
9. Know that there are many different types of leaders.
Views on Managers Versus Leaders
• “A man who can persuade people to do what they don’t want to do, or do what they’re too lazy to do,
and like it.”
Harry S. Truman (1884–1972), 33rd president of the United States
• “You cannot manage men into battle. You manage things; you lead people.”
Grace Hopper (1906–1992), Admiral, U.S. Navy
• “Managers have subordinates—leaders have followers.”
Chester Bernard (1886–1961), former executive and author of Functions of the Executive
• “The first job of a leader is to define a vision for the organization…Leadership is the capacity to
translate vision into reality.”
Warren Bennis (1925–), author and leadership scholar
• “A manager takes people where they want to go. A great leader takes people where they don’t
necessarily want to go but ought to.”
Rosalynn Carter (1927–), First Lady of the United States, 1977–1981
The following diagram captures the essence of Leadership & Management and their
differences and dependencies. Leaders lead with their Hearts and Spirit focusing on
People while Managers appeal to Minds and Hands to achieve results. There is no
reason one cannot play both sides and in fact many good Managers are also good leaders.
Because one cannot really "Manage People", People can only be lead while inanimate
things such as Processes, Budget, Goals etc. can be managed.
Entrepreneurship
• It’s fitting that this section on entrepreneurship follows the discussion of Google. Entrepreneurship is defined
as the recognition of opportunities (needs, wants, problems, and challenges) and the use or creation of
resources to implement innovative ideas for new, thoughtfully planned ventures.
• Entrepreneur is a person who engages in the process of entrepreneurship. We describe entrepreneurship as a
process because it often involves more than simply coming up with a good idea—someone also has to convert
that idea into action. As an example of both, Google’s leaders suggest that its point of distinction “is
anticipating needs not yet articulated by our global audience, then meeting them with products and services
that set new standards. This constant dissatisfaction with the way things are is ultimately the driving force
behind the world’s best search engine.”
Strategy
• When an organization has a long-term purpose, articulated in clear goals and objectives, and these
goals and objectives can be rolled up into a coherent plan of action, then we would say that the
organization has a strategy. It has a good or even great strategy when this plan also takes advantage of
unique resources and capabilities to exploit a big and growing external opportunity. Strategy then, is
the central, integrated, externally-oriented concept of how an organization will achieve its
objectives. Strategic management is the body of knowledge that answers questions about the
development and implementation of good strategies.
SYNCHRONIZING LEADERSHIP,
ENTREPRENEURSHIP, AND STRATEGY
Now you will want to understand how they might relate to one another. In terms of
principles of management, you can think of leadership, entrepreneurship, and strategic
management as answering questions about “who,” “what,” and “how.” Leadership helps
you understand who helps lead the organization forward and what the critical characteristics
of good leadership might be. Entrepreneurial firms and entrepreneurs in general are
fanatical about identifying opportunities and solving problems—for any organization,
entrepreneurship answers big questions about “what” an organization’s purpose might be.
Finally, strategic management aims to make sure that the right choices are made—
specifically, that a good strategy is in place—to exploit those big opportunities.
The principles of management are drawn from three specific areas—leadership, entrepreneurship, and
strategic management. You learned that leadership helps you understand who helps lead the organization
forward and what the critical characteristics of good leadership might be. Entrepreneurs are fanatical
about identifying opportunities and solving problems—for any organization, entrepreneurship answers
big questions about “what” an organization’s purpose might be. Finally, as you’ve already learned,
strategic management aims to make sure that the right choices are made—specifically, that a good
strategy is in place—to exploit those big opportunities.
PLANNING, ORGANIZING, LEADING AND
CONTROLLING
A manager’s primary challenge is to solve problems creatively. While drawing from a
variety of academic disciplines, and to help managers respond to the challenge of creative
problem solving, principles of management have long been categorized into the four major
functions of planning, organizing, leading, and controlling (the P-O-L-C framework). The
four functions, summarized in the P-O-L-C figure, are actually highly integrated when
carried out in the day-to-day realities of running an organization. Therefore, you should not
get caught up in trying to analyze and understand a complete, clear rationale for
categorizing skills and practices that compose the whole of the P-O-L-C framework.
THE P-O-L-C FRAMEWORK
PLANNING
• Planning is the function of management that involves setting objectives and determining a course of action for
achieving those objectives. Planning requires that managers be aware of environmental conditions facing their
organization and forecast future conditions. It also requires that managers be good decision makers.
• Planning is a process consisting of several steps. The process begins with environmental scanning which simply
means that planners must be aware of the critical contingencies facing their organization in terms of economic
conditions, their competitors, and their customers. Planners must then attempt to forecast future conditions.
These forecasts form the basis for planning.
There are many different types of plans and planning.
• Strategic planning involves analyzing competitive opportunities and threats, as well as the strengths and
weaknesses of the organization, and then determining how to position the organization to compete effectively
in their environment. Strategic planning has a long time frame, often three years or more. Strategic planning
generally includes the entire organization and includes formulation of objectives. Strategic planning is often
based on the organization’s mission, which is its fundamental reason for existence. An organization’s top
management most often conducts strategic planning.
• Tactical planning is intermediate-range (one to three years) planning that is designed to develop relatively
concrete and specific means to implement the strategic plan. Middle-level managers often engage in tactical
planning.
• For example, if you decide one of the best ways to reach your target consumer is TV advertising,
then the tactical plan needs to carefully spell out the specifics of the TV campaign.
• Operational planning generally assumes the existence of organization-wide or subunit goals and objectives
and specifies ways to achieve them. Operational planning is short-range (less than a year) planning that is
designed to develop specific action steps that support the strategic and tactical plans.
ORGANIZING
• Organizing is the function of management that involves developing an organizational structure and allocating human resources to
ensure the accomplishment of objectives. The structure of the organization is the framework within which effort is coordinated. The
structure is usually represented by an organization chart, which provides a graphic representation of the chain of command within an
organization. Decisions made about the structure of an organization are generally referred to as organizational design decisions.
• Organizing also involves the design of individual jobs within the organization. Decisions must be made about the duties and
responsibilities of individual jobs, as well as the manner in which the duties should be carried out. Decisions made about the nature
of jobs within the organization are generally called “job design” decisions.
LEADING
• Leading involves the social and informal sources of influence that you use to inspire action taken by others. If managers are
effective leaders, their subordinates will be enthusiastic about exerting effort to attain organizational objectives.
• The behavioral sciences have made many contributions to understanding this function of management. Personality research and
studies of job attitudes provide important information as to how managers can most effectively lead subordinates. For example,
this research tells us that to become effective at leading, managers must first understand their subordinates’ personalities, values,
attitudes, and emotions.
CONTROLLING
Controlling involves ensuring that performance does not deviate from standards. Controlling consists of three steps, which include
(1) establishing performance standards,
(2) comparing actual performance against standards, and
(3) taking corrective action when necessary.
Performance standards are often stated in monetary terms such as revenue, costs, or profits but may also be stated in other terms, such as units
produced, number of defective products, or levels of quality or customer service.
ECONOMIC, SOCIAL AND ENVIRONMENTAL
PERFORMANCE
ECONOMIC, SOCIAL AND ENVIRONMENTAL
PERFORMANCE
Principles of management help you better understand the inputs into critical organizational outcomes like a
firm’s economic performance. Economic performance is very important to a firm’s stakeholders particularly
its investors or owners, because this performance eventually provides them with a return on their investment.
Other stakeholders, like the firm’s employees and the society at large, are also deemed to benefit from such
performance, albeit less directly. Increasingly though, it seems clear that noneconomic accomplishments, such
as reducing waste and pollution, for example, are key indicators of performance as well.
Indeed, this is why the notion of the triple bottom line is gaining so much attention in the business press.
Essentially, the triple bottom line refers to The measurement of business performance along social,
environmental, and economic dimensions. We introduce you to economic, social, and environmental
performance and conclude the section with a brief discussion of the interdependence of economic performance
with other forms of performance.
Economic Performance
• In a traditional sense, the economic performance of a firm is a function of its success in producing
benefits for its owners in particular, through product innovation and the efficient use of resources.
When you talk about this type of economic performance in a business context, people typically
understand you to be speaking about some form of profit.
• The definition of economic profit is the difference between revenue and the opportunity cost of all
resources used to produce the items sold. This definition includes implicit returns as costs. For our
purposes, it may be simplest to think of economic profit as a form of accounting profit where profits
are achieved when revenues exceed the accounting cost the firm “pays” for those inputs. In other
words, your organization makes a profit when its revenues are more than its costs in a given period of
time, such as three months, six months, or a year.
Social and Environmental Performance
• You have learned a bit about economic performance and its determinants. For most organizations, you
saw that economic performance is associated with profits, and profits depend a great deal on how
much customers are willing to pay for a good or service.
• With regard to social and environmental performance, it is similarly useful to think of them as forms
of profit—social and environmental profit to be exact. Increasingly, the topics of social and
environmental performance have garnered their own courses in school curricula; in the business
world, they are collectively referred to as corporate social responsibility (CSR)
CSR is a concept whereby organizations consider the interests of society by
taking responsibility for the impact of their activities on customers, suppliers,
employees, shareholders, communities, and the environment in all aspects of
their operations.
This obligation is seen to extend beyond the statutory obligation to comply
with legislation and sees organizations voluntarily taking further steps to
improve the quality of life for employees and their families, as well as for the
local community and society at large.
Organizational performance can be viewed along three dimensions—
financial, social, and environmental—collectively referred to as the triple
bottom line, where the latter two dimensions are included in the
definition of CSR. While there remains debate about whether
organizations should consider environmental and social impacts when
making business decisions, there is increasing pressure to include such
CSR activities in what constitutes good principles of management.
This pressure is based on arguments that range from CSR helps attract
and retain the best and brightest employees, to showing that the firm is
being responsive to market demands, to observations about how some
environmental and social needs represent great entrepreneurial business
opportunities in and of themselves.
